Your client has asked you to improve their performance. What will you use as a metric of success? This will depend on the KPI – or key performance indicator – that you’re monitoring. We’ll explore the answer to ‘what is KPI’, give some key performance indicators examples, and discuss how to set KPI for your client below.
What is KPI?
KPI stands for key performance indicator, which includes any metrics you can use to measure how well a business is performing. Monitoring the right KPIs is vital to ensure that you’re not wasting time on optimising less-important metrics for your clients. This is because it takes time and money to track any KPI, whether it’s looking at sales, marketing, or turnover data.
The best KPIs will be tailored to your client’s industry and department, measuring performance against relevant targets as well as industry standards.
Key performance indicators examples
Before we delve into how to choose the best KPIs, here are a few examples of some of the most common for different industries.
Cost per acquisition
Monthly recurring revenue
Online media KPIs
Social referral rates
Time spent on site
Retail and ecommerce KPIs
As you can see from these examples, one of the first ways to determine the best KPIs is simply to consider your business structure and industry.
How to choose the best KPIs
In addition to considering your industry, here are a few tips to help you choose the best key performance indicators.
1. Consider your client’s objectives.
The first step to choosing effective, strategic KPIs is to sit down with your client to discuss objectives. Performance means nothing if it doesn’t align with the business’s goals. To start the discussion, ask your client to define their primary short, medium, and long-term goals. This might be dependent on department. While executives tend to be more concerned with long-term objectives, line managers might be looking more at the short-term. You need to find KPIs that address all of these objectives.
The client’s product or service will also directly impact the most useful key performance indicators. For example, if the product is a source of revenue, then revenue should be included as a key metric of success.
2. Choose KPIs with easily measurable results.
As you pull together a list of potential key performance indicators based on company objectives, the next step is to make sure your top KPIs are easy to measure. Some can be quite vague, particularly when it comes to poorly defined customer experience surveys. By contrast, a KPI like page views is straightforward, with less room for interpretation.
Quantitative indicators are easiest to measure, looking at quantities of hard data like revenue or operational costs.
Qualitative indicators include factors like user feedback and product use, which is more difficult to measure.
It’s best to blend the two if you want to really understand how your business is doing, but you’ll need a higher percentage of quantitative indicators for ease of reporting.
3. Whittle your choice down to a select few.
It might be tempting to longlist your client’s metrics, but when looking at how to set KPI you should recommend selecting a limited number. Limiting the selection ensures the client thinks about those which are truly ‘key’ to success. Remember that it costs time and money to optimise each metric, so a wider selection could be inefficient. A worst-case scenario would be wasting money on irrelevant data, leading to poor business decisions. Ideally, you should choose two or three KPIs for each objective.
4. Choose reliable KPIs.
Accuracy is also important when selecting the best KPIs. Think about how your client will obtain data, and who will be analysing it. For a key performance indicator like Customer Acquisition Cost, you’ll be pulling in data from multiple sources, including operating costs, marketing, and sales. This could include a multitude of marketing platforms and accounting software, all of which must be up to date.
Making the most of KPI metrics
We work in a business climate overflowing with data. Without streamlining your client’s choice of key performance indicators, it’s all too easy for them to become distracted or overwhelmed. Try to align business vision with accurate, reliable, and measurable metrics to keep your finger on the pulse of performance.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.